Distribution Pricing Based on Improved Long-Run Incremental Cost Pricing with Dynamic Security Factor

To meet network security requirements, all components of network are designed to be able to withstand contingencies, which results in significant cost to network development. Hence, network pricing should take network security into consideration. In the original long-run incremental cost(LRIC) pricing method, security factor is defined to charge for network security. It assumes that security factor is constant before and after the nodal injection. This paper proposes an improved LRIC pricing method, considering the fact that security factor of each component will be changed with nodal injections. This paper analyzes the factors that affect the security factor and illustrates the improved LRIC method with dynamic security factor. To demonstrate the difference between the improved LRIC pricing method and the original LRIC pricing method, simulation studies are conducted on a three-nodes system and the IEEE 14-nodes system, respectively; and the results show that the improved LRIC method can more accurately reflect the impact on network costs from users and ensure more reasonable allocation of network costs.